Yes. Round my way, the "average" house is about 250,000. The disjoint makes a mockery of the market. The 3% band was supposed to be a punishment for rich people buying country estates. Round here, anything with more than 3 bedrooms and many smaller houses get punished. You can even buy 2 bed flats for well over 250,000.
Christian.
Indeed.
The system is set up so that a house effectively cannot be priced between £119,999 and £121,120, or between £252,499 and £257,500. If the average price in an area is around £255k then the effect of this gap is quite pronounced.
I think this is mainly psychological, because people don't want to pay the money to the government. I prefer to just factor it into the overall cost of a purchase (stamp duty, legal fees, disbursements, moving costs, estate agents fees), but that still means you've had a jump of £5k in these costs.
Al
But the current system brings its own economic inefficiencies. People are keen to pay big money for properties in certain areas because they think they will be a good investment and this turns into a self-fulfilling prophecy. Businesses have to pay higher wages to compensate for higher housing costs. Individuals are effectively encouraged to buy and own the largest property they can afford which means that less money is invested elsewhere.
If you had a CGT regime in force that used the current taper relief rules then it would act as a very good regulator of the economy. Your equity becomes current value - (mortgage + tax liability). When prices start to rise sharply your equity rises less sharply so this damps enthusiasm for remortgaging and spending on consumption - as has been the case over the last few years. If house prices don't rise for several years your tax liability progressively falls (because of the taper relief) and your equity increases.
What is strange is that no party at the last election seemed to realise this. MH's claim that putting the threshold up to £250K would help buyers is very questionable: several journalists reckoned (correctly IMO) that it would just lead to a corresponding increase in prices - good news for sellers. In one paper's Q&A column last weekend the question was from someone who had been told their house was really worth £265K or so, but was told that realistically they would (as advised by their agent) have to price it at £250K - something which the Conservative's 'cut' would have done nothing to redress.
It's only good news for sellers when people can afford the price.
At the moment, they can't. That's why sales volumes are very small, estate agents have been layed off, etc.
Bit of a downer for small business but hey - who cares if you get an extra few quid in your pocket.
High interest rates are bad for everyone, not just those with a mortgage.
Well, isn't that what the house sellers want? And don't tell me it's just so that they can buy another house.
But why should it be a problem for small businesses? Two of our children have those, higher interests wouldn't have a direct effect on them.
They are not for savers. There are still many of us who rely on interest for income - having struggled for many years.
But we're old so don't count.
Mary
I was running a small business and signing the paycheques when Lawson was running things. Although high interest rates certainly hurt small business, there's a big gap between "high" and "so low they trigger an insane housing boom".
Well if you went to the garden centre more often you;d see that they're full of an affluent but aged population shuffling around bored out of their brains. QED.
Oh, and Maria Camillus pushing Stuart's bathchair around too.
Does that mean (with your experience!) that you're one of them ? :-)
As for bored out of my brain - if I come cross like that my powers of communication are diminishing - which isn't what most people say!
Mary
Mary
[...]
[...contrived example...]
With the benefit of hindsight, my example was overcomplicated and rather contrived. Perhaps it would have been better to say something like this:
Over the last 10 years (say), average house prices in most areas of the country have risen *considerably* faster than average salaries.
To expand; if a person on average salary needed a 3x mortgage to buy a first house in 1995, a similar person is likely to need a 6x (or whatever) mortgage today.
A slowdown, which is a situation where house prices are not rising as quickly as they were, will not address this imbalance unless house prices rise *more slowly* than average incomes, and even then (because current inflation rates are so low) this imbalance will take many many years to correct.
People who already own property are (to an extent) insulated from this because their main asset (their house) has risen at the same rate as all other houses in the area.
As first time buyers have no property, and as no other investment has come close to matching house price rises, the only thing which is likely to help them any time soon is a housing market recession where prices actually fall.
This isn't as bad for the rest of the market as it sounds; properties are likely to remain at the same relative values. It is scary for people who end up in negative equity, and a real problem for those who are in NI and need to sell. Even in NI though, if you do not need to sell and can keep up the mortgage payments there is no real problem.
Not sure where I'm going with this one. Just glad I'm not a 1TB!
Hwyl!
M.
The thing that marks a slow down in the market is that fewer houses are put up for sale, so you can expect that to change.
Prices are not expected to drop. However, provided the rate of increase is less than the rate at which wages rise, the effect will be similar.
Colin Bignell
^^^^^ Do you mean across? :-))
As an aside, have you noticed the lack of use of the letter T in the English, as she is spoken? The glottal stop is truly the thing to use.
Dave
The secret is to free up land, free up the draconian planning system and allow people to build on unused subsidised land, and introduce Land Value Tax.
Let the free maket sort itself out.
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"nightjar .uk.com>" > Even a small reduction in prices will make it a little easier for first
Last year was supposed to be a slow market yet I gather average house prices rose 10%. Love to know who got a bigger pay rise than that.
Unfortunately there is, and probably will remain, a greater demand than supply so house prices will outstrip inflation for years to come. First time buyers may not be able to afford anything but couples divorcing can usually afford two properties quite easily by taking on a larger mortgage each. As there probably isn't the room to build 62million dwellings in the UK. at least not where people actually want to live, we have a problem.
Well, in reality, negative equity need not be a problem either. Take an extreme example:
Couple buys a house for £200,000. It's a 3 bed semi. The market crashes and it's valued at £70,000 all of a sudden. They're still paying a mortgage on the £200k (let's assume interest rates stay static).
All this time they wanted a 4 bed detached house. Before, it would have cost £350,000 in that area. Now it costs £120,000. So to move, they just have to raise an extra £50,000 in capital, rather than £150,000.
Sure, they lost out on money, compared to if they could have rented in between and made a £80,000 profit! However, the level of mortgage repayment remains constant, and the extra funds required for the bigger property are drastically reduced.
Therefore a drop in the market is beneficial to most people!
aIn article , Doctor Evil writes
For once the docktor speaketh sense..
Except that all of middle England enforces a NIMBY zone.....
Ah yes, the 'Bloody Maggie won't join the ERM so I'll tweak interest rates to lock the Pound to the DMark' boom. Oddly, the Pound had to be artificially lowered at that time, unlike the real ERM fiasco.
Thanks for all that, Martin, although I wouldn't have said your earlier reply ws contrived, honestly my brain isn't geared for numbers. I think we've discussed this before in relation to PINs.
So am I. But I'm very aware that there are a lot and my heart goes out to them, except for those who won't be satisfied with something modest to begin with but that's another story.
Mary
I suppose I did. I apologise, it's not like me to make a typo and when I do I have myself whipped.
Eveyone needs a hobby ...
You really know how to inflame my ire, don't you!
Mary
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